The Bank of Canada announced on Wednesday a 25 basis point reduction in interest rates, marking the first cut since March 2020, as widely anticipated by market participants.
Consequently, the benchmark overnight rate and the deposit rate have been lowered to 4.75%, while the Bank Rate is now at 5%.
The decision to lower rates stems from evidence indicating that underlying inflation is easing. The Governing Council concluded that monetary policy “no longer needs to be restrictive,” leading to a 25 basis point reduction in interest rates.
Policymakers noted that Canada’s economic growth was slower than expected in the first quarter, primarily due to weaker inventory investment affecting overall activity.
Labor market data indicates that businesses continue to hire, although the rate of employment growth has not kept pace with the growth of the working-age population.
In April, the annual inflation rate further decreased to 2.7%. The…
